Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/283476 
Authors: 
Year of Publication: 
2023
Series/Report no.: 
AWI Discussion Paper Series No. 740
Publisher: 
University of Heidelberg, Department of Economics, Heidelberg
Abstract: 
Do 'local' methods of evaluation, such as partial equilibrium analysis at market prices or estimation of shadow prices, provide reliable assessments of a large rural roads programme's social profitability? Consider a small open economy with one city and a rural hinterland, two traded goods, two non-tradables, two specific factors and mobile labour. The wage in some urban employment is regulated. Revenue is raised by a tariff or an excise on the imported good. Theory and model calibration with numerical examples establish that local methods perform rather dismally. With the equivalent variation yielded by general equilibrium analysis as benchmark, the first-order partial equilibrium method grossly underestimates a programme's net benefit. Shadow prices derived on the assumption that all economic activity takes place at the border - a wholesale neglect of space - yield absurd underestimates. Two spatially sensitive variants of shadow pricing fall well short of remedying them.
Subjects: 
Rural roads
cost-benefit methods
general equilibrium
small open economy
JEL: 
H54
O18
O22
R13
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
501.83 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.